Highs, lows

The past 12 months have brought a mixture of good news and bad. Here's a sampling of highs and lows of the past year:

Our highs ...-DonJon Shipbuilding and Repair shows off its busy bayfront facility to local officials.-GE Transportation announces it plans to recall the remainder of its laid-off workers.-Erie International Airport begins work on its runway extension project.

... and lows-Troyer Farms Potato Products Inc. announces plans to shut down production in Waterford, ending 44 years of chip making there.-Unemployment in Erie County stays high, ending 2010 at 8.9 percent.-Gas prices soar, reaching $3.599 last week.

John Elliott sees virtue in investments that we can touch, taste and feel. Maybe that's why Elliott, chief executive of the Economic Development Corp. of Erie County, was particularly pleased with a few recent projects. In the space of a few months, the Economic Development Corp. helped secure financing for Smith Provision Co. and for a small brewery.

"When you talk about investing in the stuff that matters for everyday life -- beer and hot dogs isn't that far off base," Elliott said. It is a long way, he said, from the sinking sand of an overpriced real estate boom or the tech bubble that burst in the early part of the last decade.

"People are coming back to the core issues," he said. "Like what do we eat, what do we drink, how do we move around -- the basic stuff of life."

The economy, the totality of our combined financial situation, is rarely all good or all bad.

People lose jobs in the best of times.

New businesses are born and grow in the deepest recession.

But after two tough years, years of soaring unemployment and darkened storefronts, Elliott is among those who see signs of better times in 2011.

There are signs of it at GE Transportation, where hundreds of workers have been recalled.

There are hints of it at DonJon Shipbuilding and Repair, a cavernous building on Erie's bayfront that once again crackles with the sound of welders and the sight of steel being fashioned into something that will float.

Meanwhile, massive public-works projects are moving ahead. Construction is expected to start in June on the long-delayed runway extension at Erie International Airport. And the renovations plans for Tullio Arena are being redrawn to match the $42 million budget.

But there are also troubling questions about the strength of this recovery.

Unemployment figures are moving in the right direction, but they haven't moved far, falling from 10.2 percent in December 2009 to 8.9 percent in December 2010, a long way from anyone's definition of full employment. In Crawford County, the unemployment rate has dropped from 10.8 percent to 9.0 percent.

Meanwhile, experts are expressing concern about a different set of numbers.

Prices of energy, food and other consumer goods are rising.

Electricity rates, frozen for more than 20 years by rate caps, rose 16.6 percent on Jan. 1 and jumped again by 6.5 percent March 1.

Gasoline, which sold a year ago for $2.75 a gallon, was flirting last week with $3.60.

Financial experts see rising energy prices as a worrisome sign.

Daniel Yergin, chairman of IHS CERA, an adviser to international energy companies, told Barrons.com, a financial website, that the impact of higher prices will depend on how long they last.

"There isn't a single tipping point, but prices above $110 to $120 (per barrel of oil) for any period ... hit businesses, force the public to make choices and limit other spending and turn psychology more cautious and nervous," he said. "This adds up to a bite out of the gross domestic product."

Record-high prices for corn and other grains hold the promise of good times in the nation's grain belt.

But the news isn't as good here -- not for most local farmers, who end up paying those higher prices to feed their livestock. And it's certainly not good news for consumers, who already paying more at the grocery store.

We can't control prices. But Elliott is among those who believe we can exercise some control over our economic future.

"The opportunities are not going to fall in our laps," he said. "We need to identify them and find ways to build on them."

In some respects, the Erie region has already done that.

Jim Kurre, professor of economics at Penn State Behrend and director of the Economic Research Institute of Erie, believes tough times have forged an economy that is more diverse and more resilient.

He thinks of the downturn of the early 1980s. Kurre refers to that recession as "the one that cleared out West 12th Street."

It was a painful time that forced many to adapt, just like the loss of his job in 2007 prompted Jeff Keddie, of North East, to rethink his career in manufacturing.

Keddie, who had worked a series of industrial jobs, decided he had enough. A one-year training program at Mercyhurst College gave him a new start as a licensed practical nurse.

The bad news is that many of our new jobs don't pay as well as those in manufacturing.

The good news is our eggs are no longer in one basket.

And that, said Kurre, is one of the reasons that what's been called the great recession was really just an average recession in Erie, a place that's noted for getting hit harder than most when the economy heads south.

"This recession was relatively mild compared to the average," he said.

Meds and eds

Good-paying jobs in medicine and education have long been viewed as a bright spot in the transition from manufacturing to service-sector employment.

The past year was a big one for health care, which represents the second- and fourth- largest employers in Erie County and the largest in Crawford County.

Hamot Medical Center affiliated with UPMC Health System; Saint Vincent Health System named a new chief executive; and Corry Memorial Hospital broke ground for a new building.

The importance of those sectors doesn't end with the number of jobs they provide.

In the next few years alone, local colleges expect to spend millions on construction projects that will employ hundreds. Some of the larger projects include a $115 million dormitory complex at Edinboro University of Pennsylvania and a $17 million dormitory at Gannon University.

College students also infuse cash into the local economy.

"Postsecondary education is certainly bringing in money from outside. It is one of our export industries," Kurre said. "About half of our students are from outside the area, and they are bringing mom and dad's credit card with them."

Those students from outside the area also provide Erie a chance to reverse the brain drain.

It's easy to conclude, for instance, that some of the students who attend Lake Erie College of Osteopathic Medicine, the nation's largest medical school, might elect to stay here.

The medical school "has been the chief source of recruitment for physicians in northwestern Pennsylvania," said John Ferretti, chief executive of LECOM and the Millcreek Health System.

The same goes for college students.

The Erie region gets "a shot at those kids" who come to college here from outside the area, Kurre said. "If they get an internship locally, if they wind up with a part-time job, we get a chance to keep some of that new blood."

Investment and innovation

The growth of health care and education are only part of Erie's future.

Jake Rouch, vice president of economic development for the Erie Regional Chamber and Growth Partnership, expects manufacturing will remain a key component of our economy.

A region that manufactured the first zippers, became the home of Thomas Edison's locomotive plant and gave birth to the American Sterilizer Co. will continue to rely on a marriage of innovation and investment.

There's been progress recently on the investment front.

Pittsburgh-based Blue Tree Allied Angels, a network of angel investors who have invested $15 million in 25 ventures, has launched an Erie group.

This network will draw on Erie's resources to invest in Erie companies, said Catherine Mott, the group's founder.

Russell Combs, executive director of the Erie Technology Incubator, sees this as a milestone.

"For Blue Tree to come in and do what they are doing -- I can't say how dynamic and how gigantic that is. It opens the doors and it draws the attention that is needed for more folks to invest," he said.

Even more recently, Ben Franklin Technology Partners announced the Erie County Gaming Revenue Authority will make $700,000 in gaming revenue available this year through the Erie Innovation Fund.

"I think there is a lot of history of companies having to leave the market to get the capital to expand and grow," he said. "If we put the ability to put (innovation and investment) together, that is a positive outcome and a win for everyone."

There are other important pieces to Erie's economic identity as we move into the second decade of the 21st century.

Here's a quick sampling:

- Tourism continues to gain momentum, according to evidence provided by rising attendance at Presque Isle State Park and growing hotel tax revenue. An expansion at Splash Lagoon Indoor Water Park and new rides at Waldameer Park & Water World could help make the area a more attractive destination.

- Drilling in the Marcellus shale, which has been called one of the world's great natural gas fields, hasn't begun in any meaningful way in Erie or Crawford counties. But ripples of economic activity are being felt, including expansions at local drilling companies and a new source of income for a local radiator repair company.

- The Erie Inland Port project made substantial strides in 2010 as Elliott and his staff traveled in search of partners and potential investors. The planned logistics center is expected to cost at least $50 million and could generate hundreds of jobs.

Looking forward

A new economy -- part manufacturing and part tourism, education, retail and medicine -- is beginning to take shape.

And Russell Combs, who works each day with the tenants of the Erie Technology Incubator, likes what he sees as he talks to tenants who are trying to cure cancer, find ways to control catheter-caused infections and reinvent how digital coupons are redeemed.

"I hear folks talk about Erie as if nothing will ever happen," he said. "If you only saw what I see every day, you would know what was right around the corner."

But success isn't a foregone conclusion, Elliott said.

"We have to be very assertive and shameless in pursuing opportunities. We cannot be casual, and we cannot be reactive," he said.

He hopes that mindset, and a future built on things we can see, touch and taste -- things like beer and hot dogs -- are where we're headed.

Elliott said, "Erie has the fundamentals to be strong in what is shaping up to be a new economy."